Oil tumbled in Asian trade today on a stronger dollar as investors flocked to the safe-haven currency after the US central bank warned of significant downside risks to the American economy.
A strong greenback makes dollar-priced crude more expensive to holders of other currencies, softening demand and leading to lower prices.
New York's main contract, West Texas Intermediate for November delivery, was down $1.21 at $84.71 a barrel in morning Asian trade, and Brent North Sea crude for November dropped $1.26 to 109.10.
The US Federal Reserve, after a two-day meeting Wednesday, unveiled a $400 billion stimulus plan reduce long-term interest rates but investors chose to focus on its warning about the outlook for the world's biggest economy and oil consumer.
In announcing the new measures, the Fed painted a grim picture of the economy, strapped with slow growth, high unemployment and a depressed housing market.
"There are significant downside risks to the economic outlook, including strains in global financial markets," the central bank's Federal Open Market Committee warned in a statement.
The Fed stimulus plan did little to buoy the markets, as US stocks dived and the dollar surged -- an indication investors were once again flocking to the currency considered a safe bet in times of crisis.
Chen Xin Yi, a commodities analyst at Barclays Capital in Singapore, said the Fed's statement about significant downside risks "contributed to some risk aversion" in the market.
